Why Is DXC Technology (DXC) Down 17.6% Since Last Earnings Report?

Core Viewpoint - DXC Technology reported better-than-expected earnings for Q3 fiscal 2025, but revenues showed a decline year-over-year, raising questions about future performance and market trends [2][3][10]. Financial Performance - Non-GAAP earnings for Q3 were 92 cents per share, exceeding the Zacks Consensus Estimate by 19.5% and reflecting a 7% increase year-over-year [2]. - Total revenues for Q3 were $3.23 billion, surpassing the Zacks Consensus Estimate by 0.7%, but down 5.1% year-over-year; on an organic basis, revenues declined 4.2% [3]. - The Global Business Services segment reported revenues of $1.67 billion, a decrease of 1.8% year-over-year, with organic growth driven by insurance software and BPS business [4]. - GIS revenues were $1.56 billion, down 8.5% year-over-year, with declines across Cloud Infrastructure, ITO & Security, and Modern Workplace divisions [5]. - Non-GAAP gross profit increased 6% to $809 million, with a gross margin improvement of 150 basis points to 25.1%, attributed to disciplined resource management and restructuring benefits [6]. - Non-GAAP operating income rose to $286 million, with an operating margin expansion of 140 basis points to 8.9% [7]. Balance Sheet and Cash Flow - As of the end of Q3, DXC had $1.72 billion in cash and cash equivalents, up from $1.25 billion in the previous quarter; long-term debt decreased to $3.64 billion from $3.83 billion [8]. - Operating cash flow for Q3 was $650 million, with free cash flow at $483 million; for the first three quarters of fiscal 2025, operating cash flow totaled $1.08 billion and free cash flow was $576 million [9]. Guidance and Outlook - DXC updated its fiscal 2025 guidance, projecting revenues between $12.8 billion and $12.83 billion, down from previous estimates of $12.9-$13.1 billion; adjusted EBIT margin is now expected to be approximately 7.9% [10]. - For Q4, DXC anticipates revenues between $3.10 billion and $3.13 billion, with an adjusted EBIT margin of approximately 7% and adjusted EPS of 75 cents [11]. - There has been an upward trend in estimates for DXC, indicating a potentially positive outlook [12][14]. Industry Context - DXC Technology operates within the Zacks Computers - IT Services industry, where Roper Technologies has shown a 2.1% gain over the past month, reporting revenues of $1.88 billion with a year-over-year change of +16.3% [15].